Do I Need A Lawyer To Review A Franchise Agreement?

Yes - in most cases, you should get legal advice before you sign a franchise agreement or pay a non-refundable deposit.

That said, the real question isn't just whether you need a lawyer. It's what you need them to check. Franchise documents can look polished and reassuring, but the clauses that affect your day-to-day profit, control and exit options are often buried in the detail.

New Zealand doesn't have a single franchise law that gives every franchisee the same mandatory protections. That makes the contract, disclosure material and any promises you've been given especially important.

If you're close to signing, a focused franchise agreement review can help you spot the clauses that could make the franchise harder, more expensive or riskier than it first appears.

Do I Need A Lawyer To Review A Franchise Agreement?

Yes, it's usually worth getting a lawyer to review your franchise agreement before you sign, especially if you'll be investing serious money, giving a personal guarantee or relying on the franchise as your main source of income.

A franchise agreement isn't just a set of brand rules. It usually controls:

• what fees you pay and when
• where you can operate
• how you market, price and sell
• what systems and suppliers you must use
• whether you can renew the term
• how you can sell or leave the franchise
• what happens if the franchisor says you've breached the agreement

In New Zealand, franchising is mainly governed by general laws, including the Fair Trading Act 1986, Contract and Commercial Law Act 2017, Consumer Guarantees Act 1993, Companies Act 1993, Privacy Act 2020 and employment laws where staff or contractors are involved.

There isn't a standalone New Zealand franchise statute equivalent to Australia's franchising code. If the franchisor is a member of the Franchise Association of New Zealand, its Code of Practice may add extra disclosure and process requirements. If it isn't, your protection comes mostly from the documents you sign and the general law.

So, the right review doesn't just say whether the document is standard. It should explain what the agreement means for your cash flow, control, renewal rights and exit plan.

What Franchise Documents Should You Review Before Signing?

You should review the full document pack, not just the main franchise agreement, because your obligations are often spread across several documents.

Ask for copies of everything the franchisor expects you to sign or follow. This may include:

• Franchise agreement: the main contract that sets the term, fees, territory, obligations, defaults and termination rights.
• Disclosure document: a summary of the franchise system, key risks, costs and franchisor information, if one is provided.
• Operations manual: the practical rules for running the business, often updated by the franchisor over time.
• Personal guarantee: a promise by you, or sometimes your spouse or business partner, to be personally liable if your company doesn't pay.
• Trade mark licence and brand rules: the rules for using the franchisor's name, logos, website assets and marketing materials.
• Supplier or approved product rules: the requirements to buy from nominated suppliers or use certain systems.
• Financial information: any profit examples, sales projections, establishment costs or benchmark figures you've been shown.

If the franchise will operate from premises, you'll also need separate advice about the site and any premises documents. That part is often handled as a property law review, because leases and licences of land raise issues that sit outside the franchise agreement itself.

Don't rely on a sales brochure or verbal reassurance if the agreement says something different. Most franchise agreements contain an entire agreement clause, which can make it harder to rely on earlier conversations unless they're written into the contract or recorded clearly.

What Red Flags Should I Look For In Fees And Sales Targets?

The biggest red flags are fees that are unclear, open-ended or payable even when your revenue drops.

Franchise fees often go well beyond the upfront licence fee. You may also be paying:

• royalties based on gross sales, not profit
• marketing fund contributions
• technology or software fees
• training fees
• stock, equipment and fit-out costs
• audit or inspection costs
• renewal fees
• transfer fees if you sell your franchise rights
• default interest and recovery costs if you pay late

The detail matters. A royalty based on gross revenue can still be payable when your business is making little or no profit. A marketing levy may be compulsory even if you don't receive much local advertising support.

A Simple Example

Say Priya is looking at a cafe franchise in Hamilton. The agreement says she must pay an 8% royalty and a 3% marketing levy on monthly gross sales.

If her cafe turns over $40,000 in a month, she pays $3,200 in royalties and $1,200 into the marketing fund. That's $4,400 before rent, wages, stock, tax, insurance and loan repayments.

Then Priya notices a minimum monthly royalty of $3,000. If her sales fall to $20,000 in a quiet month, the 8% royalty would normally be $1,600, but the minimum means she still pays $3,000, plus any marketing levy. That one clause changes her break-even point.

A good review should also check whether sales targets are realistic and what happens if you miss them. Some agreements treat missed targets as a breach, allow the franchisor to reduce your territory, or stop you renewing.

How Do Territory, Renewal And Exit Clauses Affect Your Business?

These clauses affect how much room you have to grow, how long you can keep trading and how easily you can leave if the franchise doesn't work out.

Territory

If you're promised an exclusive territory, check exactly what that means. It may only stop another physical outlet opening in your area. It may not stop online sales, delivery platforms, supermarket channels, pop-ups, mobile services or national accounts.

You should check:

• whether your territory is exclusive, non-exclusive or performance-based
• whether the franchisor can change the territory
• whether online orders from your area belong to you or the franchisor
• whether nearby franchisees can market into your area
• whether you lose territory rights if you miss sales targets

Renewal

A five-year franchise term doesn't always mean you have a simple right to stay for another five years. Renewal may depend on strict conditions, such as paying a renewal fee, completing training, signing the franchisor's then-current agreement, meeting sales targets and refurbishing the business.

Signing the then-current agreement can be a big deal. It means the renewed contract may have higher fees, different territory rights or new operating rules.

Exit

Exit clauses matter even if you're excited about joining. You should know whether you can transfer the franchise, what approval the franchisor can withhold, whether transfer fees apply and whether the franchisor has a first right to buy your franchise assets.

Look closely at restraints of trade too. In New Zealand, restraint clauses are generally only enforceable if they're reasonable and protect a legitimate business interest. Still, a wide restraint can make it harder to move on, especially if it stops you working in a similar industry across a large area for a long period.

What Disclosure Should A New Zealand Franchisor Give You?

It depends on the franchisor, but you should expect enough written information to make an informed decision before you sign or pay a meaningful deposit.

New Zealand doesn't have one mandatory franchise disclosure law for every franchisor. However, the Fair Trading Act 1986 applies to franchisors. This means a franchisor must not mislead or deceive you, and must not make unsubstantiated representations about things like earnings, demand, costs, customer numbers or growth.

If a franchisor gives you profit forecasts or example earnings, ask for the assumptions behind them. For example:

• Are the figures from company-owned stores or franchisee stores?
• Are they New Zealand figures or overseas figures?
• Do they include owner wages?
• Do they include all ongoing fees?
• Are rent, wages, software, insurance and marketing included?
• How many outlets actually achieve those numbers?

If the franchisor is a member of the Franchise Association of New Zealand, its Code of Practice may require a disclosure document to be provided at least 14 days before the agreement is signed, along with a cooling-off period that may allow cancellation within 7 days after signing. Check whether the franchisor is a member and which version of the code applies.

Also ask whether there have been franchisee exits, terminations, insolvencies or disputes in the network. You're not just assessing the legal document. You're assessing whether the system has a healthy track record.

How Much Does A Franchise Agreement Review Cost?

The cost depends on the length of the documents, the complexity of the franchise system and how much advice you need before you can make a decision.

The main options usually look like this:

• A free checklist or template: helpful for spotting broad issues, but it won't interpret your agreement or tell you what to negotiate.
• An online fixed-fee legal review: useful if you want a clear review of the documents, key risks and suggested negotiation points without open-ended hourly billing.
• A traditional hourly review: may suit larger or more complex franchise arrangements, but you should ask what work is included and how costs will be managed.

A review should usually include:

• a review of the franchise agreement and key related documents
• notes on unusual or high-risk clauses
• questions to ask the franchisor
• practical comments on fees, territory, renewal and exit rights
• suggested changes or negotiation points
• a call or written summary so you understand the advice

Be careful with anyone who only tells you the agreement is standard. Standard for the franchisor doesn't always mean fair for you. A clause can be common in franchising and still be commercially tough.

If your documents include employment, contractor or privacy processes, those should be checked too. For example, if you'll use contractors in your business, the Employment Relations Act 2000 and the Employment Relations Amendment Act 2026 contractor gateway test may affect whether those workers are treated as contractors or employees. The franchise agreement won't override employment law.

What Should I Ask For Before I Sign Or Pay A Deposit?

You should ask for the full document pack, written answers to key questions and enough time to get advice before you pay anything you can't easily get back.

Before signing, work through this practical review outline. It's not a finished legal document, and a lawyer should tailor the review to your franchise and industry, but it's a helpful way to organise your questions.

1. Parties And Structure: write down who is signing, whether you'll trade through a company, and whether personal guarantees are required.
2. Upfront Costs: list every establishment cost, including licence fees, training, equipment, stock, systems and professional advice.
3. Ongoing Fees: record royalties, marketing levies, technology fees, minimum payments and when each fee is due.
4. Territory: note whether you have exclusivity, what channels are excluded and when your territory can change.
5. Performance Obligations: write down sales targets, opening hours, staffing rules, reporting duties and audit rights.
6. Marketing And Data: note who owns customer lists, who controls online accounts, and how Privacy Act 2020 obligations are handled.
7. Renewal: list each condition you must meet to renew and whether the franchisor can require a new form of agreement.
8. Exit And Transfer: record when you can sell or transfer the franchise rights, what approvals are needed and what fees apply.
9. Termination: note what counts as a breach, whether you get time to fix it, and what happens to stock, signage and customer accounts.
10. Restraints: write down any restrictions after exit, including the area, time period and activities covered.

You should also ask for current franchisee contact details if the franchisor is willing to provide them. A conversation with someone already in the network can tell you a lot about support, margins and how the franchisor behaves when things get hard.

If the franchisor pressures you to sign immediately, that's a reason to slow down. A healthy franchise network should expect you to read the documents properly and get advice.

Key Takeaways

• Getting a lawyer to review your franchise agreement in NZ is usually a smart step before you sign or pay a non-refundable deposit.
• New Zealand doesn't have one franchise statute for every franchisor, so your contract and written disclosure material do a lot of the heavy lifting.
• Fees, minimum royalties, marketing levies and sales targets can change your cash flow more than the headline brand opportunity suggests.
• Territory, renewal and exit clauses decide how much room you have to grow, stay in the system or leave on workable terms.
• Disclosure should be checked carefully, especially financial claims, franchisee exits and whether the franchisor belongs to the Franchise Association of New Zealand.
• A useful review should leave you with clear risks, practical questions and negotiation points, not just a stamped approval.

If you'd like help with reviewing your franchise agreement, checking disclosure documents, understanding franchise fees or negotiating key clauses, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.